What Are the Liquidation and Risk Limit of Coin-margined Perpetual Contract?

Liquidation

Liquidation refers to that user’s position is closed when the margin of position equals to the maintenance margin, and the user will lose all the maintenance margin.

1.The liquidation based on the fair price

MXC adopts the fair price to avoid the liquidation arisen from the lack of liquidity or market manipulation.

2. The higher positions of the risk limit and the more margin needed

There may be the risk of unsafe liquidation when the higher position triggered, which will affect the market, however, the liquidation engine on the MXC platform can effectively close the number of positions by using more margins,

If the liquidation triggered, MXC will cancel all the unfilled orders of that contract to release the margin and maintain the position, and the open orders of another contract will not be affected. The partial liquidation is available on the MXC platform, which will automatically reduce the maintenance margin to avoid the liquidation of all positions.

3.For users who used the lowest risk limits

All the unfilled orders of that contract will be canceled by MXC. If it does not meet the requirements of the maintenance margin, the position will be liquidated at the bankruptcy price

4.For users who used the higher risk limits

When the Fill or Kill was placed, the value of this order equals to the difference value between current position value and the risk limit requested the current margin to avoid further liquidation.

The following example shows the calculation of the corresponding price. Please note that the fee and other factors are not included.

Swap(USDT Swap)

1.The liquidation price calculation on isolated position mode( margin added manually is available in isolated mode )

The calculation of liquidation price

Liquidation condition: Position margin + floating PnL< =maintenance margin

Long position: Liquidation price=(maintennace margin-position margin+ava.price*amount*face value)/(amount*face value)

Short position: Liquidation price=(ava.price*amount*face value-maintennace margin+position margin)/(amount*face value)

A user buys 10000 cont BTCUSDT perpetual swap at the price of 8000 USDT, the initial leverage is 25X, and the maintenance margin of the long position=8000x10000x0.0001x0.5%=40 USDT;

Position margin=8000x10000x0.0001/25=320USDT;

so the liquidation price of that contract can be calculated.

The liquidation price of the longposition=(40–320+8000x10000x0.0001)/(10000x0.0001)=7720

2.The liquidation price calculation on cross position mode( All the available balance can be used as position margin)

All the available balance can be used as position margin on the cross position mode, and please note that the lost cross positions can not be the position margin of other positions on cross position mode.

Inverse Swap(Coin margined trading)

1.The liquidation price calculation on isolated position mode( margin added manually is available in isolated mode )

The calculation of liquidation price

Liquidation condition: Position margin + floating PnL< =maintenance margin

Long position: Liquidation price=(ava.price*face value)/(amount*face value+ava.price(position margin-maintenance margin)

Short position: Liquidation price=ava.price*amount*face value/ava.price*(maintenance margin-position margin)+amount*face value)

A user buys 10000 cont BTCUSD perpetual swap at the price of 8000, the initial leverage is 25X, and the maintenance margin of the long position=10000x1/8000x0.5%=0.00625BTC;

Position margin=10000x1/(25x8000)=0.05BTC;

so the liquidation price of that contract can be calculated.

The liquidation price of the long position=(8000x10000x1)/(10000x1+8000x(0.05–0.00625))=7729

2.The liquidation price calculation on cross position mode( All the available balance can be used as position margin)

All the available balance can be used as position margin on the cross position mode, and please note that the lost cross positions can not be the position margin of other positions on cross position mode.

Risk limit explanation

MXC perpetual contract applies a risk limit for all the accounts, which can reduce the possibility of tremendous liquidation.

If some users have more positions, they will bring risks for others, and if their positions are closed, others will get the auto deleveraging, which can avoid by incremental risk limit. And the incremental risk limit can increase the margin requirement of more positions.

Dynamic risk limit

There are a basic risk limit and incremental limit, which combined both basic maintenance margin and initial margin requirement, using for calculating the whole margin of each position.

With the increasing of positions, the requirements of maintenance margin and initial margin will improve. The margin rate will increase or decrease according to the changes in the risk limit.

The risk limit of current contract:

Risk limit level=(Position value+the value of the unfilled orders-basic risk limit)/ incremental limit+1

Note: Risk limit level rounds up to an integer

Risk limit formula

The risk limit of each contract can be checked on the “Wallet” — “Risk limit”.

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